NHS procurement – the July 2023 Provider Selection Regime update

The Department of Health and Social Care on 13 July 2023 published a further update on the planned Provider Selection Regime which will regulate the procurement of healthcare services in England once it comes into force.

We have published articles about the Government’s plans for healthcare procurement as far back as February 2021, when the idea of the PSR was first put forward and an initial consultation took place. Since then, we have reported on the launch of the second consultation in March 2022 and the update from NHS England that the PSR would not be in force before July 2023. Our March 2022 article contains the most comprehensive summary of the plans.

In headline terms, the PSR will permit commissioners of healthcare services to award contracts without procurement in some circumstances, and to roll on contracts with existing suppliers in others. Competitive tendering will still be available, and required in some circumstances, but generally the aim is to move the procurement of healthcare services away from the expectation of tendering in all cases.

The DHSC has now published its response to the second consultation, updated its preview of proposals for the PSR and confirmed that the current plan is for the PSR to be in force by the end of 2023. Once the PSR is implemented, it will replace the Public Contracts Regulations 2015 and the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 for the procurement of healthcare services provided to individuals. At this stage, no draft Regulations have been published.

The key updates are as follows:

• The PSR will define which services are in scope by reference to CPV codes. The list of services published in the consultation document will be supplemented by additional CPV codes including family planning services and community health services, but the DHSC has been clear that these codes cannot be used to bring into scope services that are not ultimately healthcare services delivered to individuals. The full updated list of CPV codes is included in the response document.
• Recognising that healthcare services are often procured alongside other services – eg. social care services or services to facilitate delivery of healthcare like IT services – the DHSC has confirmed that the PSR will be able to be used to procure in scope healthcare services alongside any goods or services that are out of scope provided that the main subject matter of the procurement is healthcare. The response to the consultation confirms that further details on this issue will be set out in the regulations themselves and in statutory guidance. Under the Public Contracts Regulations 2015, the question of what amounts to the “main subject matter of the procurement” in cases of mixed contracts is answered by reference to the highest value element of the overall contract. It is not yet clear whether the same approach will apply under the PSR.
• One of the circumstances in which commissioners should not continue with existing arrangements is where they need to “change considerably”. The DHSC has confirmed that whether a change is considerable or not will be defined by reference to value, with a change of at least £500k and 25% of the contract’s overall value amounting to a considerable change.
• The DHSC has confirmed that its proposed list of “safe harbours” where variations to contracts would not trigger a need to reapply the PSR will stand, but that additional guidance will be provided as to how these might work in practice.
• With regard to services where there is no legal right to patient choice but commissioners decide voluntarily to offer choice in respect of a limited number of providers, the response confirms that the PSR will have to be used to appoint those providers. Where there is no limit proposed on the number of suppliers, the commissioner will have to offer a contract to any provider that meets the standard qualification criteria without a provider selection process.
• The DHSC has listened to concerns about the administrative burden of having to set out detailed reasoning for the decision to award to a particular supplier in the notice of the intention to award and has confirmed that what will need to be included is “a statement explaining the decision-making body’s rationale for choosing the selected provider with reference to the relevant key criteria”. While we can see that this may serve to reduce the administrative burden, we can also see that it could lead to significant debate in individual cases as to the level of detail required to comply. The proposals for the need for annual summaries of contracting activity will stand.
• Finally, while confirming that the hope is that the increased focus on transparency and the proposals for scrutiny and local resolution of complaints will avoid too much litigation (ie. judicial review), the DHSC has apparently recognised the need for a more robust enforcement regime in confirming an intention to establish a panel which can look at and advise on issues relating to the PSR. Further details of this proposal are still to come.

For practitioners in this area, the DHSC has confirmed that it will be holding a series of webinars on the PSR and a suite of toolkit products. For now, it is a matter of watch this space for this additional support as well as the draft Regulations themselves and the accompanying statutory guidance. We will update again when we have more information.

If you wish to discuss this further, please contact Fran Mussellwhite, Partner.